"We'll always be a manufacturing company," says Alan J. Power, president, Decoma International Inc. (Concord, Ontario, Canada), which has heretofore been a wholly owned subsidiary of Magna International, but which the vast supplier company took public last fall (although it will retain a majority of the shares). Decoma is primarily a tier-one supplier of exterior components, as in fenders; bumper systems and fascias; door, hood and deck lid assemblies, and so on. According to Power, when it comes to the exterior of a car or truck, there are few elements that Decoma can't supply. In fact, there had been just two gaps in the firm's capability portfolio until recently: the chrome plating of plastics and lighting. The chrome plating of plastics capability went on stream in February 1998; as will be described below, the exterior lighting challenge is being addressed, as well.
"Some tier-one companies," Power points out, "think that they'll just be doing engineering and organizing supplier companies below them." The tier-ones, then, will fundamentally be engineering and project management companies. But Power insists that manufacturing will be a core competency that Decoma will maintain.
He does point out, however, "During the past 10 years, product engineering has gone from being nearly nonexistent at our company to being the most important process that we have." And when he's asked to cite the competitive advantages that the firm has, he links project management right along with the full-exterior capability.
The continued emphasis on manufacturing and the preeminent position of product engineering within the organization are not in the least bit at odds. Indeed, they are actually quite complimentary, especially as they can be mutually leveraging. "In this age of continual cost reduction," Power observes, "the only way to reduce costs and to maintain margins is to have the costs engineered out."
He explains that once the approach was for a supplier to have a part approved for production by the customer. The supplier would then just run and run and run the component until it was time for it to be replaced. But now, he says, it is necessary for suppliers to be continually looking at the ways and means—both in terms of product and process engineering—to improve the quality and to reduce the cost of the part or assembly. Consequently, both skillsets (being able to engineer products and to improve the manufacturing processes) are important.
Decoma is on a continuous-improvement (CI) footing. There is a corporate-level CI coordinator. Each plant has its own CI point person, as well. Although the plants may have their own specific methodologies for addressing CI, value analysis (VA) and value engineering (VE) are fundamentals throughout the organization.
One program that goes well beyond the walls of any given Decoma plant is called "SCIP"—Supplier Cost Improvement Partnership. Power says that this initiative involves suppliers to Decoma—down to tier four—and even the customer. "We bring everyone in and become involved in cost-reduction ideas. Everyone," he notes, "shares in the resulting savings." A key advantage of this approach, he explains, is that with a whole lot of different people looking at something, there is a good chance that there will be some insights that might otherwise be missed.
Power says that one of the interesting things he's discovered about CI is "the deeper we get into it, the more opportunities there are to do more." He acknowledges, "The opportunities for some of the grand-slam homeruns"—the BIG savings events—"may be diminishing, but CI is a life-long process." He believes that more can always be accomplished.
According to Power, there are three ways to address gaps in a company's product portfolio. One is to make a business acquisition. Another is to be a "me-too" player, operating with low—or no—margins. Or there's a technology development approach. Decoma's approach: the first and/or the last.
One example of research and development for competitive advantage is in the area of lighting. As they surveyed the scene, they determined that forward lighting has plenty of strong participants, so Decoma will continue to work with suppliers including Valeo and Bosch. But for rear lighting, the developments seemed more fragmented. So fundamental R&D was initiated for rear lighting, both for taillights and for center high-mounted stop lights (CHMSLs). The company has settled on LEDs as the light source.
LEDs are being used for auto applications, particularly CHMSLs. But there is a cost disadvantage vis-a-vis incandescent lights. LEDs cost on the order of 25 to 30 cents each. And to get enough LEDs to provide the required intensity for, say, the rear and stop lights, about 75 LEDs are needed. But Decoma has some proprietary molding technology (here's where manufacturing is coming into play in product development) that permits the fabrication of "light pipes," which are used to move light from one place to another. The consequence of this is that they are able to produce a tail lamp that consists of just 24 LEDs. The packaging space is about 1.5 in. This is in comparison to the 7 to 8 in. of intrusion into the trunk for a conventional wrap-around tail lamp. In the case of CHMSL applications, the light can be applied with double-sided tape. Testing at an automobile company is expected to be completed this spring; it is possible that this technology will be available on 2000 or 2001 model year vehicles.
Looking ahead, Power sees a continued focus on suppliers providing more modules to the auto makers and, as part of this, suppliers doing more program management. He cites several advantages:
- Manufacturing expertise. Suppliers tend to have manufacturing expertise in particular areas, which may mean that they are the best at what they do.
- Timing. There's less over-the-wall engineering. Various companies can be working on things simultaneously.
- Quality. Proper modular designs can mean that there are fewer parts involved, which minimizes the number of things that can go wrong.
Power thinks that going to suppliers more often may become more important in the future when or if the light truck segment—where the OEMs are making lots of profits—plateaus or drops. They'll want to differentiate vehicles to hold on to their market-share. This will mean more low-volume niche vehicles. And in order to have the ability to do this, the automakers, Power says, will need to open up floor space in assembly plants and free-up workers, which will mean that suppliers will be called upon to provide modules.
And Decoma will be ready.